Long-Term-Care Insurance: Who Needs It?

AnnaBelle Bowers' long-time physician, Walter Watkin, gives her a kiss on the forehead at the end of her visit. When asked how long she had been coming to see him, he said, "Long enough for her file to be 2 inches thick."

Every two weeks AnnaBelle rotates from one home to another. After two years of moving her back and forth, LaDonna and Kelley have fine-tuned their routine but still fill an SUV with AnnaBelle's necessities.

LaDonna Martin (left) lends a silver bracelet to her niece, Carley Hawkins, 17, while Carley's mother, Kelley (right), fixes her dress before she leaves for her senior prom. Both LaDonna and Kelley are nurses, mothers of two and caring for their elderly relative, AnnaBelle Bowers, 87.

Kainaz Amaria
/ NPR

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Originally published on May 23, 2012 8:50 am

Americans routinely buy all sorts of insurance — for cars, homes, health and even pets and boats.

But when it comes to long-term-care insurance, relatively few sign up. Out of more than 313 million Americans, only about 8 million have any such protection, according to the American Association for Long-Term Care Insurance. The low participation rate largely reflects the high cost of long-term-care insurance.

Geneva Hunter, 66, is among those without protection. She is well aware of how helpful it would be to have such insurance. She gets schooled on that point each day: Her 89-year-old mother, Ida Christian, who has Alzheimer's disease, lives with her.

"I do not have [the insurance] because at the time it was offered [through my company], I could not afford it and take care of my mother at the same time," said Hunter, a member of one of three families being profiled by NPR in a series called Family Matters: The Money Squeeze.

"I think it was close to $400 a month," Hunter said. "That's a lot of money when you are caring for somebody else."

But with each passing birthday, Hunter feels more pressure to buy insurance. "I know it's expensive, but I have to do it," she says, because she fears becoming a financial burden to her daughter.

Many Americans share that financial goal: to not burden others. But the reality is that each year, an estimated 11 million U.S. adults need some type of long-term care.

Such care can be crushingly expensive: Just one hour of home-health-aide care costs roughly $20, while the average private nursing home room costs $87,000 a year. Neither routine employer-based medical insurance nor Medicare will pay for extended periods of custodial care.

Scott Hawkins, 46, and a member of another family in the NPR series, says he hasn't yet explored getting long-term-care insurance. In fact, future elder-care costs are so daunting that only humor can help defuse the ticking financial bomb.

"Our youngest daughter [Carley] is a little bit of a comedian and she made the comment one time to us, 'Hey, when you guys get old, don't worry about it' — and we were thinking she is going to say something nice," he said. Instead, she suggested her parents plan on living with their older daughter, Chelsea, who is studying to be a pharmacist.

Scott recalls Carley joking that he would "eat better if you live at Chelsea's house because she'll be making twice as much money as I make being a schoolteacher!"

For the nation's roughly 78 million baby boomers, the time for humor about who will prepare their meals is quickly running out. Many boomers, people born between 1946 and 1964, are expected to fall so far into poverty trying to provide themselves with paid care that they will qualify for Medicaid — the medical care program for the deeply impoverished.

A fortunate few will have long-term-care insurance, but even that option is looking sketchy as more companies exit the business. Insurance giants such as Prudential and MetLife have recently pulled back from offering long-term-care policies. Others, such as John Hancock and Genworth Financial, have turned to state regulators, seeking permission to dramatically hike premiums. Depending upon the location, the insurers' requests for higher rates have been for amounts such as 18 percent or 40 percent or, in a few cases, 90 percent.

Here are answers to some common questions about long-term-care insurance.

What is long-term-care insurance?

This type of policy covers basic daily needs over an extended time. While health care insurance or Medicare helps pay for immediate medical expenses, say, a surgeon's bill, long-term-care insurance helps people cope with the cost of chronic illnesses, such as Alzheimer's disease, or various disabilities. The policies pay for assistance with everything from the basics — bathing and dressing — to skilled care from therapists and nurses for months or even years.

Do you have to be in an institution to collect your benefits?

Long-term-care insurance typically covers out-of-pocket expenses that come with home care, assisted living and nursing homes. Most policies have a waiting period that works like a deductible. So if you need the help of a home-nursing aide, you may have to wait 90 or 120 days before your benefits start to cover those costs.

How much does insurance cost?

The American Association for Long-Term Care Insurance says people should expect to pay an average of $3,335 per year to cover a couple of healthy 60-year-olds on a plan that pays out a $150 daily benefit for up to three years. But prices can vary dramatically, depending upon factors such as the purchasers' age, the level of inflation-adjustment protection and whether the daily benefit will be $100, or some larger amount, say, $150 or $200.

Why is the coverage so expensive?

The premiums are high and rising because providing long-term care can be so risky for the insurer. In contrast, the potential claim on an insured home can be reasonably estimated. If a $100,000 home is burned to the ground, the claim would reflect that amount. But predicting how much care a person might need — and for how long — is not easy.

These days, policies typically are capped at three years because open-ended plans have proved too risky for the insurer. The insurance association points to the case of a woman who purchased coverage at age 43. For three years, she paid her annual premium of $881. Then, she needed care, so she stopped paying premiums and initiated her claim. Her care lasted 15 years and cost the insurer $1.7 million, the association said.

It's cheaper when you sign up by age 60. You have to be medically healthy to qualify. But, like auto insurance, a policy generally has no "surrender" value. That is, if you never have an auto accident, then all the money you spent on car insurance is gone forever. Typically, that's how it works with long-term-care insurance; i.e., you may pay and pay — and never get back a penny if you don't medically qualify for care.

Also, some people pay their premiums for years, and then get hit with rate hikes they can't afford. They then face the tough decision of dropping their policies — and losing any chance of collecting benefits — or trying to struggle on, paying higher rates or accepting lower benefits, such as less inflation-adjustment protection.

Is it worth buying?

Experts say the insurance can be a huge help, especially for people without children and relatively small retirement savings. But it's far from a perfect solution to all problems. For example, a policy typically covers three years of care, but many people live long beyond that cap. And the new policies are being written with more restrictions to limit insurers' risks.

Whether it makes sense to spend so much money on premiums, rather than focus on building up a retirement savings account, is a complicated equation that requires serious study.

Morning Editionproducer Jessica Smith contributed to this story.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

STEVE INSKEEP, HOST:

It's MORNING EDITION, from NPR News. I'm Steve Inskeep.

DAVID GREENE, HOST:

And I'm David Greene.

Our series Family Matters is following the lives of three families facing a reality that is growing more common in the United States: Multiple generations living under the same roof, caring for one another.

LADONNA MARTIN: This one's about me...

GREENE: Today we're going to meet the Martin-Hawkins family from Harrisburg, Pennsylvania, and they define what we mean when we say sandwich generation. As you'll hear, two women are juggling their own jobs, finding time for their kids, and also caring for the woman at the center of our story, the matriarch of the family, an 87-year-old woman who likes to sing.

ANNABELLE BOWERS: (Singing) When all the lights are low, may not be new, but I like it. How about you?

(SOUNDBITE OF LAUGHTER)

GREENE: We met Snootzie(ph) - that's what her family calls her - one morning outside the home of LaDonna Martin, who's one of her caregivers. Her real name is AnnaBelle Bowers, and she was singing along to an iPod, still smiling from the evening she and LaDonna shared the night before.

GREENE: One secret: Snootzie was a bartender for years, and she still brags about how nobody had the guts to mess with her. She lost her husband years ago, and then in 2009, she became frail enough that her family knew it was time to take her in. Two members of the family took that on: LaDonna, who's married to Snootzie's grandson, and also Kelley Martin, Snootzie's granddaughter.

BOWERS: It was funny. I said to my other granddaughter, I said, Kelley, when you and LaDonna decided to take me into your homes, you didn't think I'd live so long. And she said: No, I didn't, grandma.

(SOUNDBITE OF LAUGHTER)

KELLEY HAWKINS: And she'll say all the time: I just feel so bad. You guys are, you know, doing all this. And we're like, we wanted - we chose to do this.

GREENE: And it's clear it was not an easy choice. That was Kelley speaking right there. She and LaDonna are in their 40s - both nurses, both moms. LaDonna has a son and daughter still at home. Kelley has a daughter in college and another daughter getting ready for college next fall.

To make everything work, to do all the juggling, the two women hatched a plan. Snootzie spends two weeks with Kelley's family, and then she switches houses and spends the next two weeks with LaDonna.

And so how daunting was that decision when you two decided, you know, we're just going to take this on?

MARTIN: Honestly, at first we were like, well, we have to take her in. What else are we going to do?

HAWKINS: Yeah.

MARTIN: And it was like, but then as time goes on, you know, the stress of it is just weighing. We would keep her, and we'll keep her till, you know, we can't. But it becomes a stressor. You just kind of never feel like you can kind of do what you want, and come and go. Like, I can't just - if my kids said mom, come pick me up, you know, and let's run to the mall or run to this sport, well, I have to make sure someone's going to be here with her.

HAWKINS: It's like having another, like, toddler. So, like, you can't just pick up and go. It's - you have to think everything, plan everything ahead, because lots of times, where we're going, you know, we can't take her. We do have a wheelchair and certain different games and stuff. We will just put her in the wheelchair and take her with us. But a lot of times that's not, you know, doable.

GREENE: And I can - when she was talking about how much she sees the two of you do for her, I mean, she clearly see how much you do. What is - if you look back over the last two years - the toughest moment?

HAWKINS: One thing when you do have like your moments, like LaDonna knows exactly what I'm going through, and we're kind of - I can be her sounding board and she's mine, because we're living it.

GREENE: You can hear the stress in those voices. But there are also so many moments of joy.

UNIDENTIFIED CHILD #1: Hi, Snootz.

BOWERS: Hi, honey. How are you?

UNIDENTIFIED CHILD #1: Good. How are you?

GREENE: This is the sound of LaDonna's two kids coming home from school. They're greeted by Snootzie, who's smiling on the recliner in the living room.

BOWERS: How are you?

UNIDENTIFIED CHILD #2: Good.

MARTIN: How was school?

UNIDENTIFIED CHILD #2: Pretty good. I had lots of tests today.

MARTIN: Did you?

UNIDENTIFIED CHILD #2: Yeah.

GREENE: And Steve, getting to see your great grandma every day when you come home from school, I mean, the kids told me that it's something they really cherish.

INSKEEP: I'm glad you brought up that part, David, because as we've mentioned from the beginning, this can be painful. It can be expensive. We heard it compared to caring for another toddler. But this is also something living together, different generations in the same household, something that families choose to do and that they find rewarding, in many cases.

GREENE: And you could feel from this family - and from the others we're following, too - that as hard as it gets, I mean, they grow closer together through this whole process.

INSKEEP: And although we've talked about the financial difficulties that can be involved here - if you have to quit a job, for example, to take care of an elderly parent or grandparent. There can be financial benefits to this, as well, can there not?

GREENE: Yeah. And that financial benefit, Steve, is something that I've spoken to this family a lot about, as well.

INSKEEP: So it can be a double-edged situation. And in this situation, the Martin-Hawkins family has gone to an expert, in effect, for advice - a lawyer, someone who specializes in what is called elder law. Her name is Marielle Hazen, and she gave us some insight into the family's situation.

When somebody comes to you the way that the Martins and the Hawkins came to you, what do you do as an elder-care lawyer?

MARIELLE HAZEN: Well, as an elder-care lawyer, I do a broad range of things. And elder law is really a specialty in understanding the public benefits for individuals. It also deals with establishing decision-makers for individuals. It deals with Medicare. So when - there's benefit issues, Medicare and Medicaid benefits, and also veterans' benefits, a lot of estate planning, a lot of tax work. So elder law is really a broad umbrella of a lot of different areas that impact not just the elderly, but people of any age who may have disability issues and capacity issues.

INSKEEP: Now, the Hawkins and the Martin families, who we've been following, when they came to you, what did they need help with the most?

HAZEN: Well, there are a lot of different issues going on, there. And really, we just say that, you know, obviously, there are two - there's a granddaughter and a granddaughter-in-law - providing care, you know, doing so at sacrifice to their families. But they don't view it as a sacrifice. But there is a monetary sacrifice that happens. And so dealing with that and making it a workable situation in a way that, you know, everyone is going to be protected and needs are going to be met is, you know, one of the aspects of any family caregiving situation.

INSKEEP: So, is the next question, then, whether - I mean, if you're taking care of grandma - if you're taking care of Snootzi, in this case - the question is: Is it fair to ask some compensation from her, and how do you arrange that?

HAZEN: In that situation, grandma's not actually paying for caregiving services. She had a son who had passed away and had left resources to be used for her benefit. But in most circumstances, people don't have that extra set of funding. And so it could be mom or dad or grandma or grandpa who is paying directly for the caregiver services.

INSKEEP: I understand you helped these two families - the Martins and the Hawkinses - draw up a legal agreement. What did you do?

HAZEN: Well, again, talking generally about these kinds of circumstances, people - I see attorneys call them different things, either a family caregiver agreement or a personal care agreement, where there's an arrangement for the caregiver to be compensated for services that are being provided.

INSKEEP: This has got to be an extraordinarily complex thing to wade into, because we're dealing with this clash of emotion and practicality. You want to take care of your mom. You want to take care of your grandma or your grandpa. You don't want to charge for that. They never charged you. But at the same time, there are practical considerations, and the money needs to come from somewhere.

HAZEN: That's right. There are practical considerations. And I see a lot of family members making a lot of sacrifice: leaving the workforce, losing their retirement benefits, losing health care benefits in order to make sure their parents are provided the best care.

INSKEEP: Marielle Hazen is an elder law attorney in Harrisburg, Pennsylvania. Her clients include the Martin and Hawkins families, who are among the families we are following for our series Family Matters. Thanks very much.

HAZEN: Thank you for having me.

(SOUNDBITE OF MUSIC)

INSKEEP: And you can see images of Snootzi's family and read about an insurance policy that many people are taking out to fund their later years, all a part of David's series, Family Matters. It's at npr.org. Transcript provided by NPR, Copyright NPR.